UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 8-K
__________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) February 5, 2014
___________________
Matrix Service Company
(Exact Name of Registrant as Specified in Its Charter)
___________________
DELAWARE | 001-15461 | 73-1352174 | ||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||
5100 E Skelly Dr., Suite 700, Tulsa, OK | 74135 | |||
(Address of Principal Executive Offices) | (Zip Code) | |||
918-838-8822
(Registrant’s Telephone Number, Including Area Code)
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
__________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02 | Results of Operations and Financial Condition. |
On February 5, 2014, Matrix Service Company (the “Company”) issued a press release announcing financial results for the second quarter and six months ended December 31, 2013. The full text of the press release is attached as Exhibit 99 to this Current Report on Form 8-K.
The information in this Item 2.02 and Exhibit 99 attached hereto is being furnished pursuant to Item 2.02 and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 | Financial Statements and Exhibits. |
The following exhibit is furnished herewith:
Exhibit No. | Description | |
99 | Press Release dated February 5, 2014, announcing financial results for the second quarter and six months ended December 31, 2013. | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Matrix Service Company | ||||
Dated: February 5, 2014 | By: | /s/ Kevin S. Cavanah | ||
Kevin S. Cavanah | ||||
Vice President and Chief Financial Officer | ||||
EXHIBIT INDEX
Exhibit No. | Description | |
99 | Press Release dated February 5, 2014, announcing financial results for the second quarter and six months ended December 31, 2013. | |
Exhibit 99
MATRIX SERVICE COMPANY ANNOUNCES STRONG SECOND QUARTER RESULTS AND INCREASES FISCAL 2014 REVENUE AND EARNINGS GUIDANCE
• | Matrix Service Company closed on its acquisition of Kvaerner North American Construction |
• | Quarterly revenues of $311.0 million were a record and increased by 40.5% over the prior year |
• | Second quarter fully diluted earnings per share was $0.38 compared to $0.21 in the same period a year earlier |
• | Record backlog of $882.6 million on project awards of $278.8 million and acquired backlog of $242.0 million |
TULSA, OK – February 5, 2014 – Matrix Service Company (Nasdaq: MTRX) today reported its financial results for the second quarter and six months ended December 31, 2013. The trend of strong revenue, earnings and backlog growth continued in the second quarter of fiscal 2014 with quarterly revenues of $311.0 million, $0.38 of earnings per fully diluted share and period end backlog of $882.6 million.
Impact of Previously Announced Acquisition to Earnings
As previously announced, on December 21, 2013 the Company completed the acquisition of Kvaerner North American Construction, a premier provider of capital construction and maintenance services to power generation, integrated iron and steel, and industrial process facilities in North America. Since this acquisition occurred late in the fiscal quarter, acquisition related revenues and earnings were not significant. However, the Company recorded a charge to selling, general and administrative costs of $2.0 million for transaction related fees.
John Hewitt, President and CEO of Matrix Service Company said, "Our second quarter results are visible indications of the progress we are achieving toward our strategic plan and the hard work of our talented employees, which is clearly demonstrated by our record revenues and improving margins. Our liquidity position remains strong and continues to provide us with the necessary resources to achieve both our short and long-term business objectives. The recent acquisition significantly enhances our capabilities and geographic footprint and will enable us to continue to grow the business, particularly in the Electrical Infrastructure and Industrial segments."
Second Quarter Fiscal 2014 Results
Revenues for the second quarter ended December 31, 2013 were $311.0 million compared to $221.4 million in the same period a year earlier, an increase of $89.6 million, or 40.5%. Net income for the second quarter of fiscal 2014 was $10.3 million, or $0.38 per fully diluted share. In the same period a year earlier, the Company earned $5.4 million, or $0.21 per fully diluted share.
Revenues increased in our Storage Solutions and Industrial segments by $82.9 million and $24.1 million, respectively. Revenues in the Electrical Infrastructure and Oil Gas & Chemical segments declined by $12.9 million and $4.5 million, respectively. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 11.0% despite a Storage Solutions project charge of $4.4 million, which reduced margins by 1.5%. Gross margins were 10.1% in the second quarter of fiscal 2013. Consolidated gross profit was $34.2 million in the second quarter of fiscal 2014 compared to $22.3 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $19.3 million, in the second quarter of fiscal 2014 compared to $13.6 million in the same period a year earlier. Acquisition related expenses of $2.0 million increased selling, general and administrative costs as a percent of revenue by 0.6% to 6.2% in fiscal 2014 compared to 6.1% in the same period a year earlier.
Six Month Fiscal 2014 Results
Revenues for the six months ended December 31, 2013 were $537.2 million compared to $431.0 million in the same period a year earlier, an increase of $106.2 million, or 24.6%. Net income for the first six months of fiscal 2014 was $16.9 million, or $0.63 per fully diluted share. In the same period a year earlier, the Company earned $10.1 million, or $0.39 per fully diluted share.
Revenues increased in our Storage Solutions and Industrial segments by $86.8 million and $41.8 million, respectively. Revenues in the Electrical Infrastructure and Oil Gas & Chemical segments declined by $13.3 million and $9.1 million, respectively. Strong project execution enabled the Company to achieve a fiscal 2014 gross margin of 11.1% despite a Storage Solutions project charge of $4.0 million, which reduced margins by 0.9%. In the same period a year earlier gross margins were 10.3%. Consolidated gross profit was $59.6 million in the first six months of fiscal 2014 compared to $44.6 million in the same period a year earlier due to higher revenues and higher gross margins. Selling, general and administrative costs were $34.0 million in fiscal 2014 compared to $27.9 million in the same period a year earlier. Acquisition related expenses of $2.0 million increased selling, general and administrative costs as a percent of revenue by 0.4% to 6.3% in fiscal 2014 compared to 6.5%, in the same period a year earlier.
Backlog
Backlog at December 31, 2013 totaled $882.6 million, an increase of $255.9 million, or 40.8%, compared to the backlog at June 30, 2013 of $626.7 million, and increased $209.8 million, or 31.2%, compared to September 30, 2013 backlog of $672.8 million. Project awards totaled $278.8 million and $551.1 million in the three and six months ended December 31, 2013. Backlog at December 31, 2013 also includes acquired backlog of $242.0 million.
Income Tax Expense
The effective tax rates in the three and six months ended December 31, 2013 was 28.4% and 32.2%, respectively. The rates were lower than the comparable periods in the prior year primarily due to a revision to the estimated benefit of the federal R&D tax credit available to the Company.
Financial Position
The net purchase price of Kvaerner North American Construction was $51.4 million and was funded with cash on hand and $15.0 million in borrowings under the the senior credit facility. At December 31, 2013, the Company’s cash balance was $73.3 million. The cash balance along with availability under the senior credit facility gives the Company liquidity of $162.0 million.
Earnings Guidance
The Company is increasing its fiscal 2014 revenue guidance to between $1.20 billion and $1.25 billion and its earnings per fully diluted share guidance to between $1.15 and $1.30.
Conference Call Details
In conjunction with the earnings release, Matrix Service Company will host a conference call with John R. Hewitt, President and CEO, and Kevin S. Cavanah, Vice President and CFO. The call will take place at 11:00 a.m. (Eastern) / 10:00 a.m. (Central) on Thursday, February 6, 2014 and will be simultaneously broadcast live over the Internet which can be accessed at the Company’s website at matrixservicecompany.com on the Investors’ page under Conference Calls/Events. Please allow extra time prior to the call to visit the site and download the streaming media software required to listen to the Internet broadcast. The conference call will be recorded and will be available for replay within one hour of completion of the live call and can be accessed following the same link as the live call.
About Matrix Service Company
Matrix Service Company provides engineering, fabrication, construction and repair and maintenance services to the Electrical Infrastructure, Oil Gas & Chemical, Storage Solutions and Industrial markets.
The Company is headquartered in Tulsa, Oklahoma, with regional operating facilities throughout the United States and Canada.
This release contains forward-looking statements that are made in reliance upon the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are generally accompanied by words such as “anticipate,” “continues,” “expect,” “forecast,” “outlook,” “believe,” “estimate,” “should” and “will” and words of similar effect that convey future meaning, concerning the Company’s operations, economic performance and management’s best judgment as to what may occur in the future. Future events involve risks and uncertainties that may cause actual results to differ materially from those we currently anticipate. The actual results for the current and future periods and other corporate developments will depend upon a number of economic, competitive and other influences, including those factors discussed in the “Risk Factors” and “Forward Looking Statements” sections and elsewhere in the Company’s reports and filings made from time to time with the Securities and Exchange Commission. Many of these risks and uncertainties are beyond the control of the Company, and any one of which, or a combination of which, could materially and adversely affect the results of the Company's operations and its financial condition. We undertake no obligation to update information contained in this release.
For more information, please contact:
Matrix Service Company
Kevin S. Cavanah
Vice President and CFO
T: 918-838-8822
Email:kcavanah@matrixservicecompany.com
Matrix Service Company
Consolidated Statements of Income
(In thousands, except per share data)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, 2013 | December 31, 2012 | December 31, 2013 | December 31, 2012 | |||||||||||||
Revenues | $ | 310,998 | $ | 221,436 | $ | 537,215 | $ | 431,044 | ||||||||
Cost of revenues | 276,848 | 199,103 | 477,589 | 386,467 | ||||||||||||
Gross profit | 34,150 | 22,333 | 59,626 | 44,577 | ||||||||||||
Selling, general and administrative expenses | 19,333 | 13,561 | 34,047 | 27,881 | ||||||||||||
Operating income | 14,817 | 8,772 | 25,579 | 16,696 | ||||||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (351 | ) | (217 | ) | (574 | ) | (400 | ) | ||||||||
Interest income | 8 | 12 | 13 | 20 | ||||||||||||
Other | (68 | ) | (7 | ) | (156 | ) | 50 | |||||||||
Income before income tax expense | 14,406 | 8,560 | 24,862 | 16,366 | ||||||||||||
Provision for federal, state and foreign income taxes | 4,095 | 3,124 | 7,999 | 6,246 | ||||||||||||
Net income | $ | 10,311 | $ | 5,436 | $ | 16,863 | $ | 10,120 | ||||||||
Less: Net income attributable to noncontrolling interest | 5 | — | 5 | — | ||||||||||||
Net income attributable to Matrix Service Company | $ | 10,306 | $ | 5,436 | $ | 16,858 | $ | 10,120 | ||||||||
Basic earnings per common share | $ | 0.39 | $ | 0.21 | $ | 0.64 | $ | 0.39 | ||||||||
Diluted earnings per common share | $ | 0.38 | $ | 0.21 | $ | 0.63 | $ | 0.39 | ||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 26,245 | 25,939 | 26,180 | 25,863 | ||||||||||||
Diluted | 26,884 | 26,204 | 26,772 | 26,172 | ||||||||||||
Matrix Service Company
Consolidated Balance Sheets
(In thousands)
December 31, 2013 | June 30, 2013 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 73,292 | $ | 63,750 | ||||
Accounts receivable, less allowances (December 31, 2013— $82 and June 30, 2013—$795) | 161,502 | 140,840 | ||||||
Costs and estimated earnings in excess of billings on uncompleted contracts | 92,212 | 73,773 | ||||||
Deferred income taxes | 7,458 | 5,657 | ||||||
Inventories | 3,193 | 2,988 | ||||||
Income taxes receivable | 2,709 | 3,032 | ||||||
Other current assets | 5,981 | 6,234 | ||||||
Total current assets | 346,347 | 296,274 | ||||||
Property, plant and equipment at cost: | ||||||||
Land and buildings | 31,075 | 29,649 | ||||||
Construction equipment | 78,115 | 69,998 | ||||||
Transportation equipment | 41,214 | 34,366 | ||||||
Office equipment and software | 20,900 | 18,426 | ||||||
Construction in progress | 11,376 | 9,080 | ||||||
182,680 | 161,519 | |||||||
Accumulated depreciation | (95,868 | ) | (90,218 | ) | ||||
86,812 | 71,301 | |||||||
Goodwill | 67,122 | 30,836 | ||||||
Other intangible assets | 31,091 | 7,551 | ||||||
Other assets | 4,535 | 4,016 | ||||||
Total assets | $ | 535,907 | $ | 409,978 | ||||
Matrix Service Company
Consolidated Balance Sheets (continued)
(In thousands, except share data)
December 31, 2013 | June 30, 2013 | |||||||
Liabilities and stockholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 115,894 | $ | 68,961 | ||||
Billings on uncompleted contracts in excess of costs and estimated earnings | 95,773 | 62,848 | ||||||
Accrued wages and benefits | 23,894 | 21,919 | ||||||
Accrued insurance | 7,751 | 7,599 | ||||||
Other accrued expenses | 3,619 | 3,039 | ||||||
Total current liabilities | 246,931 | 164,366 | ||||||
Deferred income taxes | 7,643 | 7,450 | ||||||
Borrowings under senior credit facility | 23,191 | — | ||||||
Total liabilities | 277,765 | 171,816 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock—$.01 par value; 60,000,000 shares authorized; 27,888,217 shares issued as of December 31, 2013, and June 30, 2013 | 279 | 279 | ||||||
Additional paid-in capital | 117,043 | 118,190 | ||||||
Retained earnings | 158,285 | 141,427 | ||||||
Accumulated other comprehensive income | 52 | 227 | ||||||
275,659 | 260,123 | |||||||
Less: Treasury stock, at cost— 1,549,518 shares as of December 31, 2013, and 1,779,593 shares as of June 30, 2013 | (18,222 | ) | (21,961 | ) | ||||
Total Matrix Service Company stockholders’ equity | 257,437 | 238,162 | ||||||
Noncontrolling interest | 705 | — | ||||||
Total stockholders' equity | 258,142 | 238,162 | ||||||
Total liabilities and stockholders’ equity | $ | 535,907 | $ | 409,978 | ||||
Matrix Service Company
Results of Operations
(In thousands)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, 2013 | December 31, 2012 | December 31, 2013 | December 31, 2012 | |||||||||||||
Gross revenues | ||||||||||||||||
Electrical Infrastructure | $ | 37,180 | $ | 50,123 | $ | 70,057 | $ | 83,393 | ||||||||
Oil Gas & Chemical | 62,121 | 66,635 | 124,913 | 133,732 | ||||||||||||
Storage Solutions | 180,655 | 98,183 | 289,201 | 203,601 | ||||||||||||
Industrial | 31,130 | 7,033 | 53,821 | 12,008 | ||||||||||||
Total gross revenues | $ | 311,086 | $ | 221,974 | $ | 537,992 | $ | 432,734 | ||||||||
Less: Inter-segment revenues | ||||||||||||||||
Electrical Infrastructure | $ | — | $ | — | $ | — | $ | — | ||||||||
Oil Gas & Chemical | 10 | — | 307 | — | ||||||||||||
Storage Solutions | 78 | 538 | 470 | 1,690 | ||||||||||||
Industrial | — | — | — | — | ||||||||||||
Total inter-segment revenues | $ | 88 | $ | 538 | $ | 777 | $ | 1,690 | ||||||||
Consolidated revenues | ||||||||||||||||
Electrical Infrastructure | $ | 37,180 | $ | 50,123 | $ | 70,057 | $ | 83,393 | ||||||||
Oil Gas & Chemical | 62,111 | 66,635 | 124,606 | 133,732 | ||||||||||||
Storage Solutions | 180,577 | 97,645 | 288,731 | 201,911 | ||||||||||||
Industrial | 31,130 | 7,033 | 53,821 | 12,008 | ||||||||||||
Total consolidated revenues | $ | 310,998 | $ | 221,436 | $ | 537,215 | $ | 431,044 | ||||||||
Gross profit (loss) | ||||||||||||||||
Electrical Infrastructure | $ | 3,854 | $ | 6,629 | $ | 7,184 | $ | 11,335 | ||||||||
Oil Gas & Chemical | 6,686 | 8,045 | 14,217 | 15,912 | ||||||||||||
Storage Solutions | 19,788 | 7,748 | 32,625 | 17,717 | ||||||||||||
Industrial | 3,822 | (89 | ) | 5,600 | (387 | ) | ||||||||||
Total gross profit | $ | 34,150 | $ | 22,333 | $ | 59,626 | $ | 44,577 | ||||||||
Operating income (loss) | ||||||||||||||||
Electrical Infrastructure | $ | 860 | $ | 3,696 | $ | 2,160 | $ | 6,015 | ||||||||
Oil Gas & Chemical | 2,407 | 3,927 | 5,670 | 7,702 | ||||||||||||
Storage Solutions | 10,760 | 1,550 | 16,592 | 4,999 | ||||||||||||
Industrial | 790 | (401 | ) | 1,157 | (2,020 | ) | ||||||||||
Total operating income | $ | 14,817 | $ | 8,772 | $ | 25,579 | $ | 16,696 | ||||||||
Backlog
We define backlog as the total dollar amount of revenues that we expect to recognize as a result of performing work that has been awarded to us through a signed contract, notice to proceed or other type of assurance that we consider firm. The following arrangements are considered firm:
• | fixed-price awards; |
• | minimum customer commitments on cost plus arrangements; and |
• | certain time and material arrangements in which the estimated value is firm or can be estimated with a reasonable amount of certainty in both timing and amounts. |
For long-term maintenance contracts and other established arrangements, we include only the amounts that we expect to recognize into revenue over the next 12 months. For all other arrangements, we calculate backlog as the estimated contract amount less revenues recognized as of the reporting date.
Three Months Ended December 31, 2013
The following table provides a summary of changes in our backlog for the three months ended December 31, 2013:
Electrical Infrastructure | Oil Gas & Chemical | Storage Solutions | Industrial | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Backlog as of September 30, 2013 | $ | 97,087 | $ | 118,920 | $ | 382,001 | $ | 74,809 | $ | 672,817 | |||||||||
Backlog acquired | 123,492 | 2,825 | — | 115,723 | 242,040 | ||||||||||||||
Net awards | 29,096 | 82,729 | 152,056 | 14,890 | 278,771 | ||||||||||||||
Revenue recognized | (37,180 | ) | (62,111 | ) | (180,577 | ) | (31,130 | ) | (310,998 | ) | |||||||||
Backlog as of December 31, 2013 | $ | 212,495 | $ | 142,363 | $ | 353,480 | $ | 174,292 | $ | 882,630 | |||||||||
Six Months Ended December 31, 2013
The following table provides a summary of changes in our backlog for the six months ended December 31, 2013:
Electrical Infrastructure | Oil Gas & Chemical | Storage Solutions | Industrial | Total | |||||||||||||||
(In thousands) | |||||||||||||||||||
Backlog as of June 30, 2013 | $ | 103,520 | $ | 120,138 | $ | 319,718 | $ | 83,361 | $ | 626,737 | |||||||||
Backlog acquired | 123,492 | 2,825 | — | 115,723 | 242,040 | ||||||||||||||
Net awards | 55,540 | 144,006 | 322,493 | 29,029 | 551,068 | ||||||||||||||
Revenue recognized | (70,057 | ) | (124,606 | ) | (288,731 | ) | (53,821 | ) | (537,215 | ) | |||||||||
Backlog as of December 31, 2013 | $ | 212,495 | $ | 142,363 | $ | 353,480 | $ | 174,292 | $ | 882,630 | |||||||||